Many people do not understand why they pay different car insurance premiums than family members, friends or neighbors. This is a commonly misunderstood concept that often needs to be explained by an insurance agent. There is no simple answer as car insurance premiums are calculated using a number of factors.
The vehicle make and model greatly impacts the amount a person pays for their insurance policy. While some vehicles get stolen or vandalized, others cost more for parts and repairs. There are even cars that are more likely to be involved in an accident. These vehicles usually sustain extensive damages in automobile collisions. When an insurance company insures a vehicle, they also calculate the likelihood of having to pay out claims.
A person's driving record is also a major factor in calculating premiums. New drivers with little experience, pose a greater risk of being involved in accidents. They also tend to file more claims than drivers who have years of experience. In addition, a person who accumulates several driving violations will be labeled a high-risk driver. This can lead to higher premiums, as opposed to those cleaner driving records.
The area where a person resides, drives, and normally parks their vehicle, can also impact insurance premiums. Larger cities tend to have higher crime rates, such as car theft and car vandalism. As a result, making a claim for one of these reasons is significantly higher. For insurance companies, they usually offset this possibility by assessing higher premiums.
Other factors include vehicle usage, and the average distance a person expects to drive each year. Insurance companies may even offer discounts to drivers who have more than one vehicle insured. This, of course, relates to cars that are all on the same policy. At times, customers with different types of coverage can also benefit. There are even discounts for seniors, or for those that have participated in a defensive driving program. Most insurance companies will review these discounts with their clients.
The type of coverage a person selects can also make a difference in the amount of premiums paid. A person with only liability insurance will likely pay less than a driver with full vehicle insurance. Full insurance usually includes collision and comprehensive coverage, along with personal injury protection and medical insurance.
When a person secures car insurance, he or she should always review their policy carefully. This allows them to see what is covered, while understanding the reasons behind a particular premium amount. Premiums are determined by taking a variety of factors into consideration. It is for this reason, that no two people will ever pay the same amount to insure their vehicle.